If you have been investing for awhile you will have seen some ups and downs. You will notice patterns and will notice how many investors make their decisions. Unfortunately you will notice many mistakes. Have you ever received advice to Buy High Sell Low? Let’s hope not but why do so many do it?
The answer comes from 4 vital mistakes.
- Follow – People in general follow and do what everyone else is doing. The problem is that it is often too late when it comes to investing. From now on when you hear that an investment is hot, that should be a red flag for investors to do thorough due diligence. Otherwise, investors may be getting in too late and buying high. Markets are cyclical, they always have and always will go up and down. Some of the most successful investors do the exact opposite of the masses. It is highly recommended for investors to do their research and do what makes sense, what everyone else is doing should have no bearing on their decision.
- Emotional Decisions – Emotions are often why people make investments. Excitement, fear and other emotions drive their decision to invest. Sales tactics often invoke these emotions like the excitement of a success story or the fear when an opportunity will not be available if not jumped on this second. This can turn into a disaster. All investing decision must be informed business decisions.
- Greed – Greed can lead investors to do deals they shouldn’t and get in way over their head. Know your risk tolerance and capacity. Always stick to your criteria.
- Lack of Control – This can also be referred to as speculating. Real estate speculation is when an investor buys a property in hopes that the market will go up. I don’t know an investor who can control the market. Investors can better control their success by doing deals at max 70% LTV, that cash flow and have multiple exit strategies. Success can be realized even in a bad market by investors control success by doing only deals where the numbers make sense.